Pound Sterling to Norwegian Krone (GBP/NOK) Exchange Rate hits highest level since 2009

Pound to Norwegian Krone exchange rate chart

The Pound soared to its strongest level since July 2009 against the Norwegian Krone after Norway’s Central Bank hinted that it could cut interest rates if the nation’s economy shows signs of deterioration.

The Krone declined by almost 2% against the Euro and US Dollar just after the decision was announced and was 1.3% lower against the Swedish Krona.

“A further weakening of the outlook for the Norwegian economy my warrant a reduction in the key policy rate,” said Central Bank Governor Oeystein Olsen in a statement following the rate decision.
Investors favoured the Pound as they see the Bank of England as being the first of the major Central Banks to raise interest rates despite the release of minutes earlier in the week which showed that BoE policy makers were less hawkish as to a rate rise than expected.

“If it’s a choice between central banks that are keeping rates low for a very long period of time or a central bank that is actually relatively hawkish, I think it’s quite simple, Sterling is the one out of all the Group-of-seven currencies that’s got the opportunity to do something quite significant,” said Simon Derrick, the chief currency strategist at the Bank of New York Mellon Corp.

The Norwegian Central Bank left its policy rate unchanged at today’s meeting and said that it will remain between 1% and 2% until the publication of the next monetary report on September the 18th.

The Norwegian Bank’s comments marked a reversal in expectations as only in March it was forecasting an interest rate rise next summer, but due to signs of a slowdown in domestic growth it now expects rates to remain unchanged until the end of next year.

“The Norges Bank surprised us with a very dovish set of revisions. Expected hikes for 2015 were removed, and the rest of the curve was shifted lower,” said Josh O’Byrne, currencies strategist at Citigroup.